Figuring Out College Costs

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CAVANAUGH: This is Midday Edition on KPBS. I'm Maureen Cavanaugh. Just last week on KPBS morning edition, we heard a profile of a family struggling under tens of thousands of dollars of school debt. Two children and a single mother who went back to school to get her degree all together say they will owe $180,000 in student loans. Here in San Diego, the cost of tuition at UC San Diego has gone up 70% in the last five years. What is going on here? And how can an average family afford to send kids to college? Lynn O'Shaughnessy is director of planning at the university of California extension. She's author of the book the college solution, and the handbook called shrinking the cost of the college. O'SHAUGHNESSY: Thanks Maureen. CAVANAUGH: Why has college gotten so expensive? O'SHAUGHNESSY: Well, there's a variety of reasons. One with state schools, state governments have been shrinking their support. They have shrinking revenue, so the schools suffer. Private schools, one reason, this is a cynical reason, but when families are looking at private school, they sometimes think that the higher the price tag, the better the school. So nobody wants to be the low price school because then you're considered inferior. Another reason is because schools are really competing for top kids, schools around the country. So they want to give scholarships to students. How do they do that? Where do they get the money? They raise their tuition, with that extra revenue they can go after the kids they really want. CAVANAUGH: It wasn't so long ago that parents used to be able to put a little money aside on a regular basis for the kids' college fee, and by the time the kids turned 18, they had a college fund that resembled what college was going to cost. Now, how can middle class parents manage to save up there are this incredible cost of a university education? O'SHAUGHNESSY: Well, I think they have to be smart about it, and they shouldn't just assume that the schools they've always thought their children were going to go to are the best schools. Sometimes, it's becoming increasingly so in California, the cheapest best alternatives are not necessarily going to be state schools. The tuition has been skyrocketing, and the financial aid at state schools has not kept up at all. If you become an empowered consumer and you understand what motivates schools to give money to kids, then you're better able to find schools that are going to be most affordable. The reality is that 85% of private colleges and universities give scholarships to their students. So you don't have to be that A-plus student to get the money. If you look at state and private schools throughout the country, 2/3 of kids get help. When you look at the price tags, they're really meaningless. The only figure that matters is the one you're going to pay. And actually there is a great new tool, I'm super excited about it. This is the first full admission season coming out, it's something called a net price calculator. And every school in the country has on their business with a net price calculator so a parent or student can go, use this calculator, and put in their own information from their latest tax return, and some of these calculators ask for information about the students' academic profile, and it will spit out a number that is -- provides an estimate of what that school is going to cost, which can be very different from what the price tag is. CAVANAUGH: Take us through it, if you would. Tell us what the sticker price, if you will, is on one of the most expensive schools like Stanford. Then book, and room and board, and you look at that price and take it down with the discounts, what you might end up actually paying. O'SHAUGHNESSY: Right. Well, Stanford is one of those very expensive schools. It's a very elite school. The ivy leagues in this country, Georgetown, cal tech, they also have the very best financial aid. They meet 100% of your need. Just because Stanford costs about $55,000 -- CAVANAUGH: Annually! O'SHAUGHNESSY: Annually, yeah, what they do is build a package with other people's money first. They get qualified for federal grants. Then they say does this child qualify for state money? The cal grant program. If so, they put that in there, and then if they need more money, Stanford will throw in their own grant money for the child. So basically, probably if your family makes less than $60,000, and you're going to Stanford, you probably won't pay anything or very little. It's next to nothing. It'll be far cheaper than going to a UC school or cal state. CAVANAUGH: And this presupposes that you've been accepted to Stanford. O'SHAUGHNESSY: Of course. That's the issue. The problem is the most elite schools, the ones that give these Cadillac financial aid plans are the hardest to get into, and they also attract primarily rich students, very affluent students, because they're the ones that have the -- have gone to the great school, they have had SAT prep classes, that kind of thing. So for most kids, you're not going to be aiming for Stanford. You're going to be aiming for other schools, and all schools, it's on a continuum. For me, you look for a kid who can get into a school with the best financial aid package possible based on their -- who they are, and what kind of student they are. CAVANAUGH: Right. Now, you in a recent article, you talked about a young man you knew who wanted to be a journalist. Who was thrilled to have gotten into Notre Dame. And tell us about his story. It's very interesting. O'SHAUGHNESSY: He was from San Diego, and he ended up -- he didn't do this. He didn't use net pricical URLT, he didn't evaluate schools and if they were going to give him any money. He ended up going there because he was excited about, hey, I'm going to Notre Dame. People are blinded by these brand name, which is really unfortunate, and he was going to get very little money. And he was going to have to work and acquire a lot of debt. And when I -- I was talking to his -- the mother of his girlfriend, and I said had he considered other less expensive alternatives like university of Missouri, which I happen to be an alumni of, which has a great journalism school? And he said no, he didn't want to do that because it didn't have the brand name. Well, if you need financial aid, you need to get over that brand name issue. There are some fabulous schools all over the country that people don't know of. Most people don't know of most schools! There are thousands of schools out there, and people only know about the premiere universities and the universities that have the sports teams! CAVANAUGH: Right. I was reading an article, and since 1989, and through 2017, whether or not Obama or Romney wins the presidency this year, all of our presidents will have graduated from either Yale or Harvard. And in George W. Bush's case, it's both. O'SHAUGHNESSY: Right. CAVANAUGH: So that name school allure, it seems to be increasing rather than decreasing. O'SHAUGHNESSY: Well, but the thing is, and in my latest book, the college solution, and I write about this in my blog too, which is of the same name, I really try to attack this whole ivy league thing. Frankly, hardly anybody gets into these schools. And if you aren't connected, if you aren't a legacy, if you aren't a development case where your parents make a ton of money and can build a wing on Harvard, or you're not a recruited athlete or in some case, some minorities, you're not getting in. Harvard's acceptance rate is less than 6%. For those that don't have a hook, it's going to be far less. But there's been studies that show it's not the darn schools that matter, it's the kids themselves. They've done some studies that show -- they looked at kids who got into Harvard and kids who were of the same academic caliber but got rejected and traced over the years what the saleasier of both these groups were, it was the same. It's not the schools, it's the kind of kids who are capable of doing well at these schools. It doesn't matter where they go. CAVANAUGH: Tell us about some of the schools that people don't think about when they're thinking about applying for college and go for a Stanford. O'SHAUGHNESSY: Well, one type of school that I particularly love, and I think they are fabulous for undergraduates are liberal arts colleges. Most people do not know the difference between a college and a university. They're quite different animals. Liberal arts colleges are smaller, but their focus is on undergraduates. Whereas a universe like the universe of Californias are research institutions. And their No.†1 mission is professor research. They have to bring in the big dollars, the big revenue from research grants. They are graded on or evaluated, they get tenure based on their research. The second mission of the research university are graduate education, and then the undergrads come in third. I don't think people understand that. But because when you ask a kid, would you like to know your professors? Would you like small classes? And they go yeah! I'd like that. Well, you're not also going to get that as a university. At a liberal arts college where you may have 2,500 kids, they aren't hogging the professors' time, and they aren't teaching the undergrads, it's the classic way of learning. You have professors knowing their students in small classes, mentoring them. Oftentimes you can get better experience, better recommendations, better internships. Not always, but there is the opportunity. And also at colleges, they're great for kids who aren't XRO verts. My two kids, my daughter came back, had amazing experiences at a school in the middle of nowheresville Pennsylvania, came back and got a job at a toy company in Solana beach. My son is at another liberal arts college 90†miles from Chicago, he's a math major, and he's had some fabulous experiences too. If kids look at colleges and not just universities, that would give them many more ideas for schools. CAVANAUGH: Tell us more about that net calculator you were talking about. I guess that works for any type of university or college. O'SHAUGHNESSY: Absolutely. CAVANAUGH: So you find out the amount of tuition, and then how much it might cost you? Is that it? O'SHAUGHNESSY: Right. As I said, the price tag is totally meaningless. And so some kids are going to -- all schools are going to give need based stay. The kids who have financial aid. For more affluent families, they're going to be looking for merit aid. So these calculators are supposed to help you regardless of where you are. Okay? They should be on the website. I've done blogs in the past, sometimes they're hard to find. Frankly, some schools that give lousy financial aid, they don't really want you to use your net price calculator, all right? If you can't find it, call the school. Or you can Google it. Just Google the name of the school, and net price calculator, and you will find it. Now, some are more accurate than others. This is a new thing. The federal government mandated that all schools had to have it on their website. The private, elite schools tend to have better calculators. And the more questions they ask, you can assume they're going to be better. CAVANAUGH: To be clear, is the amount of money they will give you toward your education, is that something that you have to eventually pay back? O'SHAUGHNESSY: Well, no. Basically the net price means -- good question, that the school the say, okay, let's say our school costs $40,000, and we're going to give you grants of $20,000, so you're going to have to pay $20,000, that grant money is free money. You never have to pay it back. Schools are not supposed to subtract loans to tell you what your net price is. Only the free money. That's an important point to make about that. CAVANAUGH: I wanted to get your feeling about for-profit higher education schools. University of Phoenix, others, there have been a lot of criticism. Some people swear we them. Do you think you pay too much? O'SHAUGHNESSY: Yes. I would be leery of a lot of for-profit schools. I think those education trusts came out recently that said you are more likely to survive the titanic disaster than graduate from a for-profit school. So keep that in mind. What I do recommend for -- when I recommend into people who are grown and want to get at that degree or didn't finish, one that I can highly recommend, it's not for-profit, but it's online, is western govern's university. CAVANAUGH: I've heard of that. O'SHAUGHNESSY: It was created by governors in the west. And it's great because you can get a degree. They have degrees in principal things that employers want. And you can get credit for things you already know. And then if you are taking a class, and you already know some of the information, [can you|you can|cu] speedup and finish if at your own time. Plus they give you mentors that you can talk to. And it's inexpensive. For nontraditional student, I would definitely check out western governor's university. CAVANAUGH: We're almost out of time. Let me ask you, for people who have to go through the whole process for their children of seeing what kind of colleges they want to apply for, when should they start that? What grade of high school? O'SHAUGHNESSY: Well, I think people should even as a freshman in high school, find out what thirds requirement expected family contribution is. Go on the college board, use the calculator, find out what that number is. That number represents what most schools are going to expect you to pay at a minimum. If you use the ESCical URLT, it shows you that it's $15,000, that's probably what you're going to have to pay no matter what school you go to. And based on that, you can start looking for schools that are going to be the most generous. And on my website, I wrote a story this week about a tool on the college board where you can evaluate how generous a school is. You want a school that I have been goes as much aid as possible. CAVANAUGH: Great information.